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My DIY Pension: Trader decides to live dangerously

I HAVE moved into new but possibly dangerous territory with the purchase of my first FTSE 100 covered warrant, writes Robbie Burns.

There are two types of warrant — “call” warrants make money from price rises, “put” warrants from falls.

I bought 2,028 Goldman Sachs FTSE 100 put warrants at 48.8p. I spent £1,000, including dealing costs, buying when the Footsie was about 4,070. If it goes higher, I’ll make a loss; if it sinks lower, I’ll be in profit.

I could sell some of my shares if I thought the market was about to nosedive, and buy more put warrants. So I could make money even during sharp market falls.

All this is new to me, so I will remain cautious and not risk more than 5% of my fund in warrants for the moment. But I imagine that this percentage will rise as I gain in confidence. I intend